The art and science of stock market investing requires tolerance for losing money on some of the stocks you buy. But serious investors should think long and hard to avoid extreme losses. We wouldn’t blame Bridge Bio Pharma, Inc. (NASDAQ:BBIO) shareholders were still reeling after the stock plummeted like a lead balloon, down 88% in just one year. That would be enough to make even the strongest stomachs turn. Since BridgeBio Pharma has not been listed on the stock exchange for many years, the market is still learning more about the performance of the company. The falls have accelerated recently, with the stock price dropping 81% in the past three months. While a drop like that is definitely a blow, money isn’t as important as health and happiness.
Looking back to the past week, investor sentiment for BridgeBio Pharma is not positive, so let’s see if there is a mismatch between the fundamentals and the stock price.
Check out our latest analysis for BridgeBio Pharma
Given that BridgeBio Pharma has posted a loss over the past twelve months, we think the market is likely more focused on revenue and revenue growth, at least for now. When a business is not making a profit, you generally expect to see good revenue growth. Some companies are ready to postpone profitability to increase revenue faster, but in this case, good revenue growth is expected.
BridgeBio Pharma has increased its turnover by 160% over the past year. That’s way above most other nonprofits. So on the face of it, we’re really surprised to see the stock price down 88% year-over-year. Clearly something unusual is going on here, like an acquisition that didn’t generate the expected profits. We recommend that you take a very close look at the stock (and any available forecasts) before considering a purchase, as the stock price is do not correlated to revenue growth, that’s for sure. Of course, markets overreact, so the drop in stock prices can be too steep.
The graph below illustrates the evolution of income and revenue over time (reveal the exact values by clicking on the image).
It is good to see that there has been significant insider buying over the past three months. This is a positive point. That said, we believe earnings and revenue growth trends are even more important factors to consider. We therefore recommend that you consult this free report showing consensus forecast
A different perspective
While BridgeBio Pharma shareholders are down 88% for the year, the market itself is up 2.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The decline in the share price has continued over the past three months, down 81%, suggesting a lack of enthusiasm from investors. Given the relatively short history of this stock, we would remain fairly cautious until we see strong trading performance. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. Nevertheless, be aware that BridgeBio Pharma shows 4 warning signs in our investment analysis and 2 of them make us uncomfortable…
There are many other companies whose insiders buy shares. You probably do do not want to miss this free list of growing companies insiders are buying.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.